Piramal Group completes DHFL acquisition; pays Rs 34,250 crore to creditors

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Updated: September 29, 2021 6:09 PM

The company said the creditors of DHFL, including fixed deposit (FD) holders, would recover an aggregate amount of Rs 38,000 crore from the resolution process of DHFL.

DHFL debt resolutionPiramal said there were 70,000 creditors of DHFL and most of them are recovering approximately 46 per cent of their pending dues. (File)

Piramal Enterprises (PEL) on Wednesday said it has completed acquisition of Dewan Housing Finance (DHFL) by paying Rs 34,250 crore to creditors of the troubled housing finance company.
The company said the creditors of DHFL, including fixed deposit (FD) holders, would recover an aggregate amount of Rs 38,000 crore from the resolution process of DHFL.

The amount comprises approximately Rs 34,250 crore to be paid by Piramal Capital and Housing Finance Ltd. (PCHFL) as a combination of cash and NCDs, and around Rs 3,800 crore which is the entitlement of creditors as per the resolution plan from the cash balance available with DHFL, the company said.

Speaking about the announcement, Piramal Group Chairman Ajay Piramal said the transaction marks a successful closure of the first resolution under the IBC rules in the financial services sector and sets a precedent for future resolutions.

“We have now made the payment of the consideration amount. In value terms, the transaction is amongst the largest resolutions till date. We will merge PCHFL and DHFL and the merged entity will be called Piramal Capital and Housing Finance Limited,” he told reporters.

For the closure of this transaction, all the necessary regulatory approvals have been received, Piramal said, adding that the merger will take place in the next couple of weeks.
The merged entity will be 100 per cent owned by Piramal Enterprises Ltd.

The total consideration paid by the Piramal Group of Rs 34,250 crore includes an upfront cash component of Rs 14,700 crore and issuance of debt instruments of Rs 19,550 crores (10-year NCDs at 6.75 per cent per annum on a half-yearly basis.

Piramal said there were 70,000 creditors of DHFL and most of them are recovering approximately 46 per cent of their pending dues through the successful completion of this process.
He said the group’s financial services business is more than adequately capitalised to fund the transaction.

In January 2021, 94 per cent of the creditors of DHFL voted in favour of Piramal Group’s resolution plan.

With this transaction, the retail asset under management (AUM) of the merged entity will increase by nearly five times and lending will be 50:50 to the retail and wholesale mix in the near future, he said.

“From the medium to the long term horizon, we plan to have a share of retail AUM going up to two-thirds of the total book,” he said.

The average ticket size of the retail loan book will be nearly Rs 17 lakh and around 38 per cent of the total retail loans, by volume, will be Rs 10 lakh or below.

Talking about the DHFL’s wholesale loan book, he said the focus will be to bring down this book and build a retail loan portfolio.

Post merger, the borrowing costs will come down by 130 basis points in comparison to FY21, Piramal said.

The acquisition will give the company access to over a million customers and presence in 301 branches across 24 states. Over the next three or four years, the company plans to have a presence in about 1,000 locations in the country and hire at least 1,000 more people in the near to mid term, he said.

When asked whether there will be a change in the management in DHFL post acquisition, Piramal said, “We are not envisaging any changes in senior management.” He said the group is still evaluating the future of Pramerica Life Insurance, which is a joint venture between DHFL Investments Ltd and Prudential International Insurance Holdings.

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